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Unformatted text preview: ECON 116 Practice Final Suggested Answers 1 (20 Points) a. Faster growth in per capita income caues a higher ratio of investment to GDP (2 points). A higher ratio of M2 to GDP causes faster growth of per capita income (2 points). Faster growth in per capita incoem creates more need for investment to expand capacity and more opportunities for profitable new investments (3 points). A higher ratio of M2 to GDP indicates a more developed financial system that is better able to channel savings to investments that yield the highest return (3 points). b. Loans are made to individuals, but if any member of the group is in defual, no member of the group can receive additional loans (5 points). This has led to low default rates because all members of the group pressure each individual member to repay her loan (5 points). 2 (20 Points) a. In Argentina, privatization of water services was associated with lower child mortality, especially in poorer municipalities (5 points). The private water serives were not allowed to set any ratesin poorer municipalities (5 points)....
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This note was uploaded on 01/20/2012 for the course ECON 116 taught by Professor Hoshi during the Spring '08 term at UCSD.
- Spring '08